Ray Dalio: 95% Of ALL Investors Will Miss This 10X Investment

In this video, I cover why Ray Dalio, the founder and CIO of the largest hedge fund in the world, is bullish on Chinese stocks.

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Over the past few months, China’s crackdowns on its tech giants have led many investors to doubt the future of Chinese stocks. Cathie Wood recently sold almost all of Ark’s Chinese holdings and many others have done the same too. Amidst the negative sentiment, Ray Dalio believes that everyone is making a huge mistake. Dalio is the founder and CIO of the largest hedge fund in the world, Bridgewater Associates. He believes that almost all Westerners have completely misunderstood China’s recent moves. This video will go in-depth on why Dalio is betting big on China’s future and why he thinks everyone is entirely wrong on China’s latest policies. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
Ray Dalio is not like a typical fund manager in the way he manages money. Everyone knows about the idea of high-risk and high-reward. In the stock market, if you take on more risk, then your potential reward increases. While that sounds logical, Dalio doesn’t see it that way. Unlike other fund managers, he focuses on low-risk and high-reward. This is called the pure alpha strategy. Simply looking at a fund manager’s portfolio returns would be short-sighted, because returns don’t include risk. Investing in more volatile assets can lead to extreme upwards and downwards swings. The typical retail investor might be fine with that, but Dalio focuses on high net worth clients that are often risk-averse. One statistic named alpha takes risk into consideration. Alpha is a number that represents someone’s risk-adjusted return, which is calculated by taking an investor’s return and subtracting it by their portfolio’s volatility. Dalio focuses purely on alpha by generating the highest return with the lowest volatility. To do this, he uses investments that counteract each other to lower overall volatility while still keeping high expected returns (do a scale with Stocks on one side, and Bonds on the other side). One of Dalio’s most famous funds is the all-weather portfolio, which has consistently generated high returns with low volatility.
Some of you may know about how China recently took down Didi from Chinese app stores. The Cyberspace Administration of China accused Didi of illegally collecting user data. We literally saw China take down the largest ridesharing app in the country in a blink of an eye. This led Didi stock to fall by 35% since Didi’s IPO in July. The other event that shocked many investors was when China announced that the education sector would become non-profit. This instantly tanked the shares of many Chinese education companies. TAL Education, New Oriental, and Gaotu Techedu stock are all down over 85-95% in the past six months. These two events among others have led investors to be fearful of China’s future policies. Nonetheless, Ray Dalio sees the situation completely differently. In Dalio’s perspective, he thinks that China has been increasingly capitalistic over the past few decades. The Chinese government’s recent policies are just a small part of a long-term trend to maximize the well-being of its citizens. In a recent article, Dalio said, “[Most Western observers] interpret moves like those two recent ones as the Communist Party leaders showing their true anti-capitalist stripes even though the trend over the last 40 years has clearly been so strongly toward developing a market economy with capital markets, with entrepreneurs and capitalists becoming rich. As a result, they’ve missed out on what’s going on in China and probably will continue to miss out.” Dalio’s statement can be directly contrasted with Cathie Wood, who recently stated that she was concerned about China’s latest moves. In Ark’s monthly market webinar, Cathie mentioned how she thinks the incentive for Chinese citizens to work has diminished. In essence, Cathie thinks China is moving closer to communism, whereas Dalio believes that China is moving closer to capitalism. So how is it possible that Dalio thinks China is still capitalistic despite the government’s recent moves?

[henryjones]

Having a million-dollar portfolio is everyone’s retirement dream. Making that dream a reality requires some serious work and strategic planning.

[Owsryudie]

At this moment it is not worth to have your money in the Chinese market.
Just wait and buy the big dip. At this moment it has (at some stocks I watch) normal pricing.

[sdtimeless]

I might be wrong but does anyone else wonder if Dalio is beholden to Chinese politicians? That’s the sense I picked up from his book “principles.”

[georgegale]

Hahahah! Ray is the CCP's best spoke person, other than Bloomberg.

[je_suis_onur]

Here is an invaluable tip for anyone looking into investing in China. When a time comes when the interests of ruling class cross the interests of the people they control, they always choose their own interests, not the greater good. People misread the recent Chinese government moves. Too much money means too much power and control.

Pretty much all organic and well functioning democracies emerged from ruling class’ ever receding power hold with consecutive concessions to the bourgeoisie. Chinese ruling class knows this. They don’t want that to happen. Hence the crackdowns.

[Foowowee]

Have no intention of holding stocks in a country we may be at war with within 3 years. Buy gold and some crypto.

[ejciicollins]

Some people would sell their country out for any amount. It's a damn shame.

[sitarang]

No use blaming Chinese government, the whole world cannot operate to peoples individual moral standards!!! Investing in China is highly risky if u are “morally” okay, but like somebody said if you can’t handle a 50% drop you don’t deserve a 10x hike.

[johnteran]

Rule of thumb, don't bet on companies with a future effectively controlled by despot fiat.

[cosmothewonderdog]

Kathie has also said she’s keeping her mind open and will reenter the Chinese market if her analysis supports doing so.

[jacktilley]

To the commenters bashing dalio on this one... You are the kind of people who see stocks going down and think it means more risk

[toddhurdon]

I put aside all judgements and subjective perceptive two days ago regarding Chinese governance and stuck to the facts. Interestingly, in the end i came up with the same thought. Specifically, China is not going to undermine its innovation or economic success; and, while im not a big Ray Dalio fan i wont let that be an excuse to exercise ad hominem over sound logic. Also Cathie is in and out of the same stocks these days like shes uncertain, so im not looking at her for guidance. Bottom line is i strongly believe there is amazing growth potential in some of these stocks that have recently been exited.

[flynnparish]

Nah, I am staying away from anything related to CCP.

[wakopaco]

I won’t have Chinese stocks in my portfolio for the foreseeable future.

[ellam]

I totally agree with Dalio's view regarding the measures taken and add education should be free! As someone growing up in a comunist country I confirm that free education was the best thing communism system had. America produces every year uneducated people as only a small number can afford college fees and mortgages. Bad policy to put young people in big debt at the beginning of their careers. On the other side I am against investing in China because Chinese government makes the rules to suit them and don't care about anyone else.

[LuichiJ]

Dalio is a shareholder and investor, not a government official or a politician. I don’t agree with his positive outlook on China.

[Frydekilde]

Chinese stocks is empowering the Chinese government. I think it’s a very bad idea to invest in China due to the way their government affects the world.

[konradzawadzki]

4:56 because that's what politicians with statist mentality do. Dalio's wrong: in a "normal" civilized state you don't destroy completely a tech company (they blocked onboarding of Didi's new users!) only because you think it's a bad idea for this company to pursue public listing. What laws did Didi (pun intended) broke? Is there a law against getting ready for an IPO? With regard to private education: another example of socialist twisted collectivist mentality: you don't fight inequality by lowering everyone's well being! How does blocking private education services benefit China in the long run? It's the kind of mentality that says that if someone has more than you instead of catching up to that person you lower his/her status to yours!

[davidwilkie]

"Truth in labelling", if you label a behaviour incorrectly because you do not have accurate knowledge about it, then misidentification is basically the same as Magical Thinking.

[j.mney]

I personally believe Dalio over Cathie Woods. Only time will tell.